China hits the credit brakes

I missed this last week but it is important. New yuan loans in December were reported by the PBOC and came in quite soft with headline aggregate financing at 1.76tr yuan as banks made up 1.26tr of that:

Non-bank lending is retracing sharply:

Year on year lending fell 18% and the 3MMA has rolled:

As has rolling annual:

Broad credit decelerated materially to 13.3%:

It is not panic stations by any means but China has begun its post-COVID tightening quite swiftly as it shifts back into the groove of the glide slope to slower growth.

Leading indicators for property are still fine:

But I do expect that the credit tightening will impact construction shifting into H2, 2021.

Be warned that the iron ore (and probably AUD boom) has a relatively short life ahead.

David Llewellyn-Smith

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